The People’s Bank of China (PBOC), or the central bank, injected 60 billion yuan into the market via 7-day reverse repo on August 3. Offset by 80 billion yuan of maturing operations of reverse repo, the move resulted in a withdrawal of 20 billion yuan on the day for the first time over last three weeks. Meanwhile, the central bank suspended the 14-day reverse repo and only carried out the 7-day reverse repo. Open market operations of the central bank were all accurate during the first three days of this week.
“The DR007 interest rate exceeded the ceiling of 2.9 percent to 2.94 percent on August 1. On the following day August 2, the central bank added 7-day reverse repo. It only conducted 7-day reverse repo on August 3, which would help DR007 interest rate keep below 2.9 percent and maintain market expectation. The central bank is very resolute in guarding the upper limit of benchmark interest rate,” said a team with CIB Research.
It is widely believed by market participants that the existing reverse repos at the open market are worth over 1 trillion yuan and will mature in next two weeks. Under this background, if capital supply becomes loose, the central bank will only drain capitals form the market and reduce the existing reverse repo to facilitate support for the liquidity in next 15 days. With operations of the central bank, capital supply is unlikely to be as affluent as early July.
According to China Merchants Securities, a total of 1,397.5 billion yuan will mature in open market. Supply of rate bond and debenture bond will increase in the second half of this year. But as long as factors are predictable, the central bank will give full consideration to capital supply in order to maintain liquidity. But this doesn’t mean its monetary policy of keeping neutral and moderate liquidity changes. Market participants should not be overoptimistic as liquidity is still worrying in August.
(By Vanessa)
“The DR007 interest rate exceeded the ceiling of 2.9 percent to 2.94 percent on August 1. On the following day August 2, the central bank added 7-day reverse repo. It only conducted 7-day reverse repo on August 3, which would help DR007 interest rate keep below 2.9 percent and maintain market expectation. The central bank is very resolute in guarding the upper limit of benchmark interest rate,” said a team with CIB Research.
It is widely believed by market participants that the existing reverse repos at the open market are worth over 1 trillion yuan and will mature in next two weeks. Under this background, if capital supply becomes loose, the central bank will only drain capitals form the market and reduce the existing reverse repo to facilitate support for the liquidity in next 15 days. With operations of the central bank, capital supply is unlikely to be as affluent as early July.
According to China Merchants Securities, a total of 1,397.5 billion yuan will mature in open market. Supply of rate bond and debenture bond will increase in the second half of this year. But as long as factors are predictable, the central bank will give full consideration to capital supply in order to maintain liquidity. But this doesn’t mean its monetary policy of keeping neutral and moderate liquidity changes. Market participants should not be overoptimistic as liquidity is still worrying in August.
(By Vanessa)
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